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Huawei 2018 Analyst Event Day Two: AI and Cloud to Unlock Growth for Smartphone Business

by Yiwen Wu | Apr 18, 2018

Following day one blog on Huawei analyst event, day two focused on the breakout sessions organized by different business groups. Our analysts from Wireless Smartphone Strategies (WSS) service joined the consumer business track, where AI and Cloud stood out as the two key words

Artificial Intelligence is part of Huawei’s new vision to “bring digital to every person, home and organization for a fully connected, intelligent world”. It is also a key ingredient for consumer BG’s goal to transfer a smartphone into an intelligent phone. The current AI deployment on Huawei’s smartphone is mainly on the device to improve user experience: for example, to enhance camera performance and battery life in its newly-launched P20 (supported by embedded AI chipset), and to optimize power management in low-end models (via AI-empowered EMUI). However, there is a clear gap between the current AI deployment and a truly intelligent phone that could “proactively sense the physical world, interact with users, and offer personalized services” as Huawei defined. We do not expect this gap could be fulfilled in the near future and we tend to believe AI is a middle- and long-term trend rather than a temporary marketing hype. We view the current AI deployment in Huawei’s smartphone is still in the early stage and Huawei needs to be prepared to allocate sufficient resource, investment, and patience for the AI technology to get more mature.

Cloud-based mobile service is another key element for Huawei’s consumer BG. It is the vendor’s reaction to the de-app trend in the near future. These cloud services include Huawei app store, Huawei Cloud, Huawei Pay, Huawei Video, Huawei Music, Huawei Reading, and SkyTone, all pre-installed on Huawei’s smartphone models. The current priority of these services is to create differentiation value to Huawei’s smartphone users, but it also carries the potential for future monetization opportunity like what mobile services have done for Apple. The current services focus mainly on the mainland of China. From differentiation view point, bringing these services to its overseas markets is a key task for Huawei in 2018, as the vendor continues to expand outside China. This actually requires Huawei to pay special attention to local regulatory compliance and to the local content sourcing. From future monetization perspective, now the question is what is Huawei’s plan to leverage post-sale revenue while shifting back towards lower-end models.

AI and Cloud are likely to fuel Hauwei’s smartphone growth in the middle- and long run. For 2018, we expect Huawei’s volume growth will be driven mainly by its shift-back to lower-end segment and the on-going consolidation in Chinese smartphone market. Huawei today announced its 2018 target for smartphone business: +20% YoY shipment growth for its middle and high-end segments, and +30% YoY revenue growth in its overseas market. We expect to see more volume growth in India, in Central Latin America, and in other emerging markets, and more revenue growth in Europe and in Asia Pacific.

Meanwhile, Huawei is also facing some challenges in 2018. First, we are cautious on the potential conflict between its volume growth in lower-end models and its corporate goal to improve profitability. Second, we expect more intensified competition will take place between Huawei and Xiaomi this year, mainly in lower-end  segment. Last but not least, it remained to be seen how Huawei is going to manage sub-brand strategy (Honor and Huawei) to avoid cannibalization both in its home market and its overseas markets.

Photo Day Two for Blog

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  1. David Kerr | Apr 19, 2018
    excellent blog Yiwen.